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SUMMARY OF 
REPORT 



OF THE 



FEDERAL TRADE COMMISSION 



ON 



GOMMERCIAL FEEDS 



MARCH 29, 1921 




2i-2^^rsjs- 



WASHINGTON 

GOVERNMENT PRINTING OFFICE 

1921 



I 



SUMMARY OF 
REPORT 



OF THE 



UJ. FEDERAL TRADE COMMISSION 



ON 



COMMERCIAL FEEDS 



MARCH 29, 1921 




washington 
gov:ernment printing office 

1921 







0^ 



FEDERAL TRADE COMMISSION. 



Huston Thompson, Chairman. 
Nelson B. Gaskill. 
John Gaeland Pollaed. 

VlCTOE MURDOCK. 

John F. Nugent. 

J. P. YoDEE, Secretary. 



LIBRARY OF CONGRESS 
DOCUMENTS DiVISiON 



nam II ■>»!«— MiaMiS^^ 



LETTER OF SUBMITTAL. 



Federal Trade Commission, 

Washington, March 29, 1921. 
To the President of the Senate of the United States. 

Sir : There is transmitted herewith in response to Senate resolu- 
tion 140, July 31, 1919, a report on the manufacture and sale of com- 
mercial feeds. 

Commerce in animal feeds has grown enormously in recent years. 
This has been due in part to the greater knowledge of feed values 
and of the varied requirements of live stock. Many of the feeding- 
stuffs now widely used are by-products which were formerly wasted. 

Farmers and feeders may purchase their feed requirements in the 
form of ready-mixed feeds or they may buy the separate commodi- 
ties and do their own mixing. The Federal and State Departments 
of Agriculture, the agricultural colleges, their staffs and other au- 
thorities render valuable assistance to farmers by advice on feeding 
problems, especially with reference to feed values and mixing their 
own rations. 

An investigation of the animal-feeds industry to be complete in- 
volves a study of practically every industry which uses in its manu- 
facturing processes vegetable material and some which use animal 
material. The by-products of all these industries supply a large 
number of different kinds of feedingstuffs. In addition to these 
feeds there are numerous others which are not the result of manufac- 
turing processes. It follows, therefore, that to make a thoroughly 
comprehensive investigation of animal feeds would involve a study 
of the manufacturing processes and of results in a large number of 
industries which produce as by-products materials suitable for feeds. 
Some indication of the ramifications of the feedingstuffs industry 
may be appreciated from the following general classification of feed- 
ingstuffs : 

1. The hays and straws. 2. The whole cereal grains. 3. Cereal 
mill by-products. 4. Starch and glucose by-products, 5. Brewery 
and distillery by-products and yeast and vinegar by-products. 6. 
Oil-mill by-products. 7. Sugar by-products. 8. Animal and fish 
by-products. 9. Miscellaneous feeds. 10. Commercial mixed feeds 
or proprietary feeds. 11. Condimental stock remedies or tonics. 

The American Feed Manufacturers' Association has listed over 
3,000 manufacturers of commercial mixed feeds, and the president 
of this association stated that this is very likely less than half of 
the total number. As a result of the foregoing facts it will be ap- 
preciated that anything like a complete survey of the feedingstuffs 
industry would involve an enormous expenditure of time and money. 
Under these circumstances the inquiry was confined to a study of rep- 
resentative feeds which enter into commerce and covers the period 
from 1913 to 1920, inclusive. 



4 SUMMARY OF EEPORT ON COMMERCIAL FEEDS. 

There is a great lack of authoritative data in regard to raany 
phases of the industry arid there are numerous questions confronting 
this business which are highly controversial. This is particularly the 
case with reference to the feed value of certain products commonly 
known as roughages or low-grade feeds. It is contended by some 
agricultural authorities and a few feed manufacturers that the use 
of certain of these low-grade feedingstuffs should be restricted, since, 
it is alleged, these feedingstuffs are roughages of which farmers pro- 
duce, or should produce, an abundance. It is also frequently alleged 
that mixed feeds containing one or more of such low-grade in- 
gredients are sold at prices out of line with their feed value. A num- 
ber of plans have been suggested to check the use of these commodi- 
ties, the most common one being the proposal to require the state- 
ment on tags and labels of the percentage of each ingredient used. 
However, important objections have been offered against the adop- 
tion of such a requirement. 

The study of the prices of feeds is attended with considerable 
difficulty. In particular the comparison of the prices of commercial 
mixed feeds with one another or with the prices of the straight 
feeds from which they are made is difficult. This will readily ap- 
pear when the great number of ingredients which enter into many 
brands of mixed feeds are considered, and also the very frequent 
changes in formulas of many, if not most, of these feeds. Hence 
no such precision is to be looked for in conclusions derived from a 
study of prices of these feeds as is possible in the study of prices of 
fairly homogeneous commodities. 

Prices of all kinds of feeds, both the so called straight feeds and 
the ready-mixed feeds, in common with the prices of practically all 
other commodities, increased greatly during the war period and 
for more than a year and a half following the armistice. Most feeds 
reached their highest prices in May or June, 1920. There were 
naturally considerable differences in the movement of prices of 
different feeds, due to their great variety and the different sources 
from which they are derived, there being at times a plentiful supply 
of some feeds, accompanied by scarcity of others. Demand, too, 
naturally fluctuates, but the price of every feed depends in some 
measure, greater or less, on the prices of other feeds, on account of 
the relative ease with which one feed can be substituted for another 
within fairly wide limits. 

One of the most important influences affecting prices during the 
war and much of the time since the armistice has been the shortage 
of freight cars, which has not only delaj^ecl shipments of finished 
products but often held up receipts of raw materials. At times this 
shortage has been acute and has caused decreased production. This 
condition, of course, has not been peculiar to the feed business. 

The wholesale prices of 10 important straight feeds and 12 com- 
mercial mixed feeds, which as a whole may be considered repre- 
sentative, respectively, of these two classes, were compared with the 
composite wholesale prices of a group of 32 farm products and of all 
commodities, as registered by index numbers compiled by the Bureau 
of Labor Statistics of the Department of Labor. These index num- 
bers give the prices of these groups of commodities by months and 
years relative to the average price of the 3'ear 1913 taken as a base. 



SUMMARY OF EEPOET OX COMMERCIAL FEEDS. 5 

Composite index numbers AYere also computed for the group of 10 
representative straight feeds and the group of 12 commercial mixed 
feeds. 

A comjiarison of these different series of index numbers shows 
that the price of all commodities in 1919 was represented by 212 
as compared with the base price of 100, or the average price of the 
year 1913. The other index numbers for the year 1919 were as 
follows: Farm products, 234; straight feeds. 236; ready -mixed feeds, 
220. There was a very close correspondence in the relative increase 
in prices of mixed feeds and farm x^roducts, and also a rather close 
correspondence for straight feeds. The relative advance in prices 
from 1913 to 1919 in the two classes of feeds and also in farm prod- 
ucts was considerably higher than in all commodities. 

The prices of feeds as well as of " all commodities " continued to 
advance during the first half of 1920, but the second half of the 
year was marked by a very great decline-in the prices of all feeds, 
both straight and ready mixed. The decline between June and 
December was as much as 57 per cent for some of the straight feeds. 
DiffeTent brands of mixed feeds declined in price from 20 per cent to 
more than 50 per cent. 

So far as general conclusions can be drawn from the study of the 
statistics of feed prices the -figures do not indicate a disproportionate 
rise in these prices as compared with farm products in general. 

A study of the costs and profits of a representative group of nine 
mixed-feed manufacturers during 1915-1919 shows that during the 
period costs of materials about doubled, while with few exceptions 
all other items of manufacturing costs and expenses increased in 
about the same proportion. Since the average cost of raw materials 
for the period 1915-1919, inclusive, was about 83 per cent of the 
conmiercial cost of sales and about 80 per cent of the selling price, 
this would indicate that by far the largest factor causing the high 
prices of ready-mixed feeds in 1919 was the great increase in the 
cost of raw materials. 

The net operating profit of these mixed-feed manufacturers was 
sufficient to net a fairly high rate of return on the investment in each 
year, while in 1917 and 1919 the rate of return was considerably 
larger, due probably in part to the fact that in these two years the 
net operating profit included some profit realized from an increase 
in value of raw materials during their period of conversion into 
mixed feeds. The average rate of return for the period 1915-1919 
was 18.77 per cent. The percentages represent the profits on the total 
investment employed in the business, which includes borrowed 
capital. The rates of return would be greater on the capital stock 
and surplus, which is the net investment of the companies. 

On the whole, competition in this industry is very active. It is 
true that there were indications that prices had been discussed by 
members of the American Feed ISIanufacturers' Association at or im- 
mediately following certain meetings of the executive committee. In 
1919 also an attempt was made by certain members of this association 
to organize a bureau, which seems to have had price fixing as an 
object, but this organization was never completed. Although a care- 
ful examination was made of the correspondence files of various as- 
sociations in the feedingstuffs industr}^ and of a number of important 



6 SUMMARY OF REPORT ON COMMERCIAL FEEDS. 

feed manufacturers, no indications were found of any concerted 
action to advance prices. Althougli the discussions of prices above 
referred to may have tended to advance prices, no evidence was 
found to establish this. On the whole, as already indicated, the 
evidence obtained in the inquiry indicates a very sharp competition 
in the manufacture and sale of feedingstuifs. 

The distribution of three important feed commodities, corn glu- 
ten feed, cane blackstrap molasses, and dried beet pulp, is in each 
case in the hands of a few concerns. This does not appear, however, 
to exclude competition in these commodities, nor does there appear 
to be any collusion or combination between the manufacturers in any 
one of the three groups. 

A number of manufacturers grant overages, i. e., a commission 
to old dealers on feeds sold to new dealers in the former's territory. 
It is possible that this may be a price discrimination, and the Com- 
mission has taken steps to determine whether it is in violation of 
section 2 of the Clayton Act or section 5 of the Federal Trade Com- 
mission Act. 

The use of alternate or different brand names for the same feed 
may be unfair unless the use of such alternate brands is fully under- 
stood by the dealer and the consumer. In any case it leads to an 
undue multiplication of brands, and it is questionable whether it is 
desirable from an economic standpoint. 

While the Eastern Federation of Retail Feed Merchants is opposed 
to direct selling to consumers by manufacturers, such opposition, 
according to a careful examination of this association's records, is in 
the nature of the " educational argument " and not by boycott or 
threats of boycott. 

Animal feeds are subject to regulation by practically^ all States 
and by the Federal Government. This regulation was found to be 
necessary because fraudulent practices such as adulteration and mis- 
branding were at one time quite common. The enactment and en- 
forcement of feed laws by the various States, however, has un- 
doubtedly resulted in great improvement so far as these practices 
are concerned. 

In most States feeds must be so labeled as to show the guaranteed 
chemical analysis and the names of each ingredient. The use of 
harmful or deleterious materials is generally prohibited. 

The results of feed law enforcement, as reported by the different 
States, indicate that the great bulk of the feeds which enter into 
commerce have been found to be substantially equivalent to th^ 
guaranty under which they have been sold. A comparison made 
from published sources by the Commission of the extent to which 
the straight and ready mixed feeds varied from their guaranteed 
chemical analysis showed no consistent differences in the average per- 
centage of deficiencies and overages as between the two classes. 
Respectfully, 

Huston Thompson, Chairman. 
Nelson B. Gaskill. 
John Garland Pollard. 
Victor Mtjrdock. 
John F. JSTugent, 



SUMMARY OF REPORT ON COMMERCIAL FEEDS. 



The inquiry into the manufacture and sale of commercial feeds 
for animals was undertaken pursuant to Senate resolution 140, 
Sixty-sixth Congress, first session, which reads as follows : 

Resolved, That the Fedei-al Trade Commission be. and it is hereby, instructed 
to malve an investigation of the manufacture and sale of commercial feeds for 
animals ; such investigation to include the gathering of statistics as to the 
supply of the various commodities which are used for animal feeds, together 
with the fluctuation in the prices of these commodities, the extent to which 
these commodities are converted into concentrated food by manufacturers ; 
what combinations or understandings, if any, exist between the feed manu- 
factui'ers and wholesale feed dealers and retail feed dealers ; and what fraud, 
if any, is practiced by dealers, in the way of misbranding or using inferior 
substitutes in mixed feeds. 

Resolved further, That the Secretary of Agriculture be, and he is hereby, 
directed to cooperate with the Federal Trade Commission in this investigation. 

De\t:lopment of the industry. — Commerce in animal feeds has 
grown enormously in recent years. This has been due in part to the 
greater knowledge of feed values and of the varied requirements of 
live stock. Many of the feedingstuffs now widely used are by-prod- 
ucts which were formerly wasted. Molasses, corn gluten feed, and 
fiour-mill by-products, to name but a few, are some of the by- 
products which were at one time burned, run into streams, or buried 
for want of a better means of disposing of them. 

The scientific feeding of animals began to receive serious con- 
sideration in the United States during the period 1870 to 1880. and 
since then has steadily grown in importance. State agricultural 
colleges have devoted more and more care to feeding questions. 
Many State and private experimental farms conduct tests and ex- 
periments with various feedingstuffs. Dairj^ farming and the rais- 
ing of all kinds of live stock more and more demand scientific man- 
agement in feeding, as well as in other matters, if the maximum re- 
turn is to be realized. Although rapid progress has been made in 
recent years, nevertheless, most authorities agree that much is yet 
to be learned. 

The Federal and State Departments of Agriculture, the agricul- 
tural colleges and other authorities render valuable assistance to 
farmers by advice on feeding problems, especially with reference to 
feed values and mixing their own rations. The extent to which 
farmers use ready-mixed feeds can not be stated, since this is de- 
pendent upon many factors. However, the use of mixed feeds has 
grown tremendously in recent years and appears likely to continue. 
That ready-mixed feeds have a j^lace is now undisputed. They serve 
a beneficial purpose and to many owners of animals are almost a 
necessity. Their increased use has been due largely to the demand 
for balanced rations ; the increased use of by-products ; the shortage 



8 SUMMARY OF REPORT ON COMMERCIAL FEEDS. 

of farm labor and desire of farmers for labor-saving devices; the 
growth of the dairy industry on small farms near centers of popula- 
tion and the increase in raising of poultry by dwellers in cities; and 
finally to the extensive advertising campaigns of the manufacturers 
of mixed feeds. 

Classification of feeding stuffs. — An investigation of the ani- 
mal feeds industry, to be complete, involves a study of practically 
every industry which uses in its manufacturing processes vegetable 
material and some which use animal material. The by-products of 
all these industries supply a large number of different kinds of 
feedingstuffs. In addition to these feeds there are numerous others 
which are not the result of manufacturing processes. It follows, 
therefore, that a thoroughly comprehensive investigation of animal 
feeds "would involve a study of the manufacturing processes and of 
results in a large number of industries which produce as by-prod- 
ucts, materials suitable for feed. Some indication of the ramifica- 
tions of the feedingstuffs industry may be appreciated from the fol- 
lowing general classification of feedingstuffs: 

1. The hays and straws. 

2. The whole cereal grains. 

3. Cereal mill by-products. 

4. Starch and glucose by-products. 

5. Brewery and distillery by-products and yeast and vinegar by- 
products. 

6. Oil-mill by-products. 

7. Sugar by-products. 

8. Animal and fish by-products. 

9. Miscellaneous feeds. 

10. Commercial mixed feeds or proprietary feeds. 

11. Condimental stock remedies or tonics. 

The American Feed Manufacturers' Association has listed over 
3,000 manufacturers of commercial mixed feeds and the president of 
this association has stated that this is ver}^ likely less than 
half of the total number. As a result of the foregoing facts it will 
be appreciated that anything like a complete survey of the feeding- 
stuffs industry would involve an enormous expenditure of time and 
money. Under these circumstances the inquiry was confined to a 
study of the representative feedingstuffs which enter into commerce 
and covers the period from 1913 to 1920, inclusive. 

Production of feedingstuffs. — In discussing the production and 
supply of animal feeds the numerous feedingstuffs which do not enter 
into commerce must, of course, be considered. Pasturage and grazing 
lands are very important factors in feeding animals and the condi- 
tion of such lands affects commerce in feeds very markedly. It was 
noted that in the fall of 1920 pasturage throughout the country was 
far better than usual and several important representatives of the 
feed trade stated that it had enabled farmers to carry their stock into 
the winter without purchasing as much feed as usual. An additional 
factor was the low price of corn, causing many farmers to feed their 
corn rather than sell it. 

Next to pasturage in importance are the home-grown feeds, such 
as the cereal grains, the hays, straws, and other fodders as well as 
ensilage. By far the greater part of the production of wheat, rye, 



SUMMARY OF EEPOET OIST COMMERCIAL FEEDS. 9 

and rice is handled commerciall3^ In the case of the hays and straws, 
while there is considerable commerce in them they are largely con- 
sumed where grown. This is also true of corn, oats, and barley. 

The above factors affect the extent to which farmers purchase 
feeds. While the total value of pasturage and the home-grown feeds 
consumed exceeds that of the feeds sold, the latter form an important 
factor in the commerce of the country and their total value is enor- 
mous, exceeding a billion dollars annually. 

Of the commercial feedingstufts — that is, the feeds which enter 
into connnerce— -the hays, straws, and whole grains, exceed, both in 
quantity and in value, the total of all the other kinds of commercial 
feedingstuffs, including mixed feeds. It is not feasible to deter- 
mine the exact production of these various groups. 

Commerce in feedingstuffs varies greatly between the different sec- 
tions of the country not only in quantity but in the kinds of feeds 
purchased. The prairie States buy large quantities of the high pro- 
tein feeds and relatively smaller quantities of the roughages, while 
in the Eastern States it is necessary for many farmers to buy not 
only the high protein feeds but much of their roughage. This situa- 
tion is responsible for the fact that the best market for mixed feeds 
is in the Eastern States. It should be borne in mind, however, that 
farmers and feeders of to-day do not as a rule depend entirely upon 
home-grown feeds. It is realized that variety in a ration is im- 
portant, and for this reason many farmers buy concentrates to sup- 
plement their home-grown feedingstuffs, while, as previously stated, 
others buy practically all their feed requirements, either ready-mixed 
or unmixed. 

The niunber of feedingstuffs is so large, and they are produced 
by so manj^ widelj^ scattered concerns that it was not to be expected 
that entirely satisfactory production statistics could be secured. 
However, the production of the more important feeds was deter- 
mined and the figures are presented in the report. Since many of 
these feedingstuffs are by-products, their production is not dependent, 
except to a very small degree, upon the demand for them, but rather 
upon the demand for the main or primary product. Similarlj;' the 
price of most of these by-product feeds depends to a considerable 
extent upon the demand and price for the primary products. 

During a part of the period covered by the report the regulations 
of the United States Food Administration affected the production of 
msinj feedingstuffs as well as the prices at which numerous feeds 
were sold. The regulation requiring flour millers to obtain a higher 
percentage of flour than normally, reduced considerably the pro- 
duction of wheat mill feeds. An increase in the production of oat 
hulls resulted from the regulations requiring the use of wheat sub- 
stitutes. 

The work of agricultural scientists and others in experimenting 
with various proclucts has tended to increase the supply of animal 
feeds. Thus, in the manufacture of tin plate considerable quantities 
of wheat middlings are used to absorb the -pslm oil through which 
the sheets of metal are passed during the manufacturing process. 
After these middlings have served this purpose they are passed over 
a magnetic field to remove all particles of metal, and the middlings 



10 SUMMAKY OF REPORT ON COMMERCIAL FEEDS. 

are then sold for feed, and it is alleged that the palm oil which has 
been absorbed increases the feeding value of the middlings. 

Nmnerous other factors influence the production of certain feed- 
ingstuffs. The Volstead Act affected the production of brewery and 
distillery by-products. In 1917 the estimated production of brewers' 
dried grains was 456,000 tons. In 1918 the estimated quantity pro- 
duced was 377,000 tons, and in 1919 the estimated production was 
but 208,000 tons. A more marked decline occurred in 1920 when the 
estimated production was only 69,000 tons. A similar decline occurred 
in the production of malt sprouts. 

The use of beet molasses instead of cereals in the manufacture of 
yeast has resulted in a decrease in the production of dried yeast 
grains. In 1918 the production of the largest yeast manufac- 
turer in the United States was over 25,000 tons, and in 1920 was 
estimated to be about 12,000 tons. It is probable that in the future 
the production of this by-product will be practically negligible. 

The imports of cane blackstrap molasses have increased steadily 
from year to year. In 1908 about 16,700,000 gallons of molasses 
(not above 40°) were imported from Cuba, the chief source of 
supply. In each succeeding year an increased amount was imported 
except in 1919, and it is estimated that the quantity imported from 
Cuba during the first eleven months of 1920 was 150,000,000 gallons. 

Practically the entire quantity of cane blackstrap molasses im- 
ported into and produced in the United States is used in the manu- 
facture of alcohol or as a feed for animals. The division of the 
supply between these two uses differs greatly at times, depending on 
various factors such as the relative price of molasses and other raw 
materials for alcohol manufacture, particularly corn. 

Several other important feedingstuffs may also be used for pur- 
poses other than feeds. Cottonseed meal, tankage, and fish scrap 
are frequently used for fertilizer, although in recent years such use 
has decreased. It is therefore difficult to determine exactly the ex- 
tent to which these commodities are used as animal feeds. However, 
it is possible to give estimates of the quantities so used which are 
satisfactory for all practical purposes. 

A number of feedingstuffs are rarely used by farmers as ingredi- 
ents in home-mixed rations. Practically the entire quantity of such 
commodities used as feeds therefore enters into mixed feeds. Among 
this group are flax plant by-product and clipped oat by-product. 
Other commodities are used in large quantities both as part of home- 
mixed rations and as ingredients in mixed feeds. The oil-mill by- 
products, corn gluten feed and dried beet i^ulp, are examples of this 
class. Other feedingstuffs, such as wheat bran, while widely used 
as ingredients in ready-mixed feeds, are moTe extensively used by 
farmers in mixing their own rations. 

The quantities of the various feedingstuffs which are used by 
mixed-feed manufacturers could not be determined, even with a fair 
degree of accuracy, without the expenditure of time and money 
entirely out of proportion to the value of any results Avhich might 
have been secured. 

Prices of feedingstuffs. — The study of the prices of feeds is 
attended with considerable difficulty. In particular the comparison 
of the prices of commercial mixed feeds with one another, or with 



SUMMARY OF KBPOET ON COMMERCIAL FEEDS. 11 

the prices of the straight feeds from which they are made, is difficult. 
This will readily appear when the great number of ingredients which 
enter into many brands of mixed feeds are considered, and also the 
very fref|uent changes in formulas of many, if not most, of these 
feeds. Hence no such precision is to be looked for in conclusions 
derived from a study of prices of these feeds as is possible in the 
study of prices of fairly homogeneous commodities. 

Prices of all kinds of feeds, both straight and ready-mixed, in 
common with the prices of practically all other commodities, in- 
creased greatly during the war period and for more than a year and 
a half following the armistice. Most feeds reached their highest 
prices in May or June, 1920. There were naturally considerable 
differences in the movement of prices of different feeds, due to their 
great variety and the different sources from which they are derived, 
there being at times a plentiful supply of some feeds and a scarcity 
of others. Demand, too, naturally fluctuates, but the price of every 
feed depends in some measure on the prices of other feeds, on account 
of the relative ease with which one feed can generally be substituted 
for another. 

One of the most important influences affecting prices during the 
war, and much of the time since the armistice, has been the shortage 
of freight cars, which has not onl}^ delayed shipments of finished 
products, but often helcl up receipts of raw materials. At times this 
shortage has been acute, and has caused decreased production. This 
condition, of course, has not been peculiar to the feed business. 

The wholesale prices of 10 important straight feeds and 12 com- 
mercial mixed feeds, which may be considered representative of these 
two classes, were compared with the composite wholesale prices of 
a group of 32 farm products and with a group of " all commodities," 
as registered by index numbers compiled by the Bureau of Labor 
Statistics of the Department of Labor. These index numbers give 
the prices of these groups of commodities by months and years rela- 
tive to the average price of the year 1913 taken as a base. Composite 
index numbers were also computed for the group of 10 representa- 
tive straight feeds and the group of 12 commercial mixed feeds. 

A comparison of these different series of index numbers shows 
that the price of all commodities in 1919 was represented by 212 as 
compared with the base price of 100, or the average price of the year 
1913. The other index numbers for the year 1919 were as follows: 
Farm products, 234; straight feeds, 236; ready-mixed feeds, 220. 
There was a very close correspondence in the relative prices of the 
mixed-feeds group, the farm-products group, and also^ a close cor- 
respondence in most of the years between the latter and the straight- 
feeds group. The relative advance in prices from 1913 to 1919 in the 
two classes of feeds and also in farm products was considerably higher 
than the advance in all commodities. 

The prices of feeds as well as of "all commodities" continued to ad- 
vance during the first half of 1920, but the second half of the year 
was marked by a very great decline in the prices of all feeds, both 
straight and ready mixed. The decline between June and Decem- 
ber was as much as 57 per cent for some of the straight feeds. Dif- 
ferent brands of mixed feeds declined in price from 20 per cent to 
more than 50 per cent. 



12 SUMMARY OF KEPOET OX COMMERCIAL FEEDS. 

So far as general conclusions can be drawn from the study of the 
statistics of feed prices the figures do not indicate a disproportionate 
rise in these prices as compared with farm products in general. 

Costs, profits, and return on investment or representative 
MIXED-FEED MANUFACTURERS. — A study of the costs and profits of a 
representative group of nine mixed-feed manufacturers during 1916- 
1019 shows that during the period costs of materials about doubled, 
while with few exceptions all other items of manufacturing costs 
and expenses increased in about the same proportion. Since the 
average cost of raw materials for the period 1915-1919, inclusive, 
was about 83 per cent of the commercial cost of sales, and about 80 
per cent of the selling price, this would indicate that by far the 
largest factor causing the high prices of read3^-mixed feeds in 1919 
was the great increase in the cost of raw materials. 

The net operating profit of these mixed-feed manufacturers was 
sufficient to yield a fairly higlu rate of return on the investment in 
each year, while in 1917 and 1919 the rate of return was considerably 
larger, due probably in part to the fact that in these two years the 
net operating profit included some profit realized from an increase 
in value of raw materials during their period of conversion into mixed 
feeds. The average rate of return for the period 1915-1919 was 18.77 
per cent. The percentages represent the profits on the total invest- 
ment employed in the business, which includes borrowed capital. The 
rates of return would be greater on the capital stock and surplus, 
which is the net investment of the companies. 

Competitive conditions. — On the whole, competition in this indus- 
try is very active. This is natural in an industry which includes 
so many different products and such a large number of widely 
scattered manufacturers. The various straight feeds not only com- 
pete with one another to a greater or less extent but also with the 
ready-mixed feeds, and both these feeds must compete with the 
home-grown feedingstuffs. This competition tends to keep the prices 
of ready-mixed feeds and straight feeds in line with one another 
on the basis of their feed utility. The possibility of home mixing 
and the wide variety of commodities which may be substituted for 
one another in any mixed feed tends in no small degree to prevent 
unreasonable prices and probably also to prevent attempts on the 
part of producers of feedingstuffs to organize and combine to obtain 
price control. 

It is true that prices were discussed by members of the American 
Feed Manufacturers' Association at or immediately following certain 
meetings of the executive committee. In 1919 an attempt was made 
by certain members of this association to organize a bureau which 
seems to have had price fixing as an object, but this organization was 
never completed. Although a careful examination was made of the 
correspondence files of A^arious associations in the feedingstuffs in- 
dustry, and of a number of important feed manufacturers, no indica- 
tion was found of any concerted action to advance prices. While the 
discussions of prices above referred to may have tended to advance 
prices, no evidence was found to establish this. On the whole, as 
already stated, the evidence obtained in the inquiry indicates a very 
sharp competition in the manufacture and sale of feedingstuffs. 



SUMMARY OF EEPOET OIsT COMMEECIAL FEEDS. 13 

The distribution of three important feed commodities, corn gluten 
feed, cane blackstrap molasses, and dried beet pulp, is in each case in 
the hands of a few concerns. This does not appear, however, to ex- 
clude competition in these commodities, nor does there appear to be 
any collusion or combination between the manufacturers in any one 
of the three groups. 

Trade practices. — A number of manufacturers grant overages, 
i. e., a commission to old dealers on feeds sold to new dealers in the 
former's territory. It is possible that this may be a price discrimi- 
nation, and the Commission has taken steps to determine whether it 
is in violation of section 2 of the Clayton Act or section 5 of the 
Federal Trade Commission Act. 

The use of alternate or different brand names for the same feed 
may be unfair unless the use of such alternate brands is fully under- 
stood by the dealer and the consumer. In any case it leads to an 
undue multiplication of brands and it is questionable whether it is 
desirable from ah economic standpoint. 

Many feed manufacturers sell their goods guaranteed against price 
decline, although a majority of them believe the practice should be 
stopped. Another trade practice which most manufacturers con- 
demn and yet many indulge in, is that of long-time contracts. Both 
of these practices are due to competition. In an effort to do aw&j 
with them members of the American Feed Manufacturers Associa- 
tion passed resolutions to the effect that the practices should be dis- 
continued. However, these resolutions did not have the desired 
result. 

Distribution of feeds. — Animal feeds reach the consumer through 
a system of distribution similar to that of other food products. 
Practically every manufacturer makes use of the retail feed dealer 
and in some sections of the country farmers' cooperative organiza- 
tions engage in this business. Most manufacturers also are willing 
to make direct sales provided the purchaser is financially responsible. 
In such cases the manufacturers frequently allow a commission to the 
local retail dealer, although he may have performed no service. 
While the Eastern Federation of Eetail Feed Merchants is opposed 
to direct sales to consumers by manufacturers, a careful examina- 
tion of this association's records did not indicate that it resorted, 
either directly or indirectly, to boj^cott or threats of boycott as a 
means of preventing direct selling. 

Low-grade feed problem. — There is a great lack of authoritative 
data in regard to many phases of the industry and there are numer- 
ous questions which are highly controversial. This is particularly 
the case with reference to the feed value of certain products com- 
monly known as roughages or low-grade feeds. It is contended by 
some agricultural authorities and a few feed manufacturers that 
the use of certain of these low-grade feedingstuffs should be re- 
stricted, since, it is alleged, these feedingstuffs are roughages of 
which farmers produce, or should produce, an abundance. It should 
be pointed out, however, that in some sections of the country farmers 
do not produce sufficient roughages to meet their requirements. It 
is also frequently alleged that mixed feeds contaming one or more 
of such low-grade ingredients are sold at prices out of line with their 



14 SUMMARY OF REPORT ON COMMERCIAL FEEDS. 

feed value. A number of plans have been suggested to restrict the 
use of these commodities, the most common one being the proposal 
to require the statement on tags and labels of the percentage of each 
ingredient used. However, important objections have been offered 
against the adoption of such a requirement, nor is it certain that 
it would achieve the result desired. It should be pointed out in con- 
nection with the foregoing that much of the agitation over the use 
of some of these low-grade feedingstuffs is based on selfish grounds 
and is due largely to competition between manufacturers of mixed 
feeds. 

Before this controversy over the low-grade feeds can be definitely 
and satisfactorily settled a series of exhaustive tests should be under- 
taken with these low-grade feeds and probably combinations of 
these low-grade feeds with certain high-grade feeds. Such tests. 
should be made by a disinterested body, preferably the United States 
Department of Agriculture. 

Guaranteed chemical analysis. — At the present time most States 
require that feedingstuffs be sold under a guaranteed chemical anal- 
ysis, showing the minimum amount of crude protein, the minimum 
amount of crude fat, the maximum amount of crude fiber, and in 
some States the total carbohydrates contained in the feed. In addi- 
tion to the chemical analysis most States require that feeds offered 
for sale shall have attached thereto tags or labels showing the name 
of each ingredient in the feed. 

The chemical analysis has come to be widely recognized as an 
index or measure of the value of a feediiigstuff. However, such use 
of the guaranteed chemical analysis is held to be unwise by most 
scientists and manufacturers. For example, it has been determined 
that there are several kinds of protein and that these proteins differ 
both in digestibility and in other qualities. Consequently merely 
to state that a feed contains given percentages of protein, fat, and 
fiber does not, it is maintained, tell the complete story. However, 
in spite of the insufficiency of the chemical analysis as a standard, 
it is the one most frequently used, and apparently must suffice until 
scientists have developed a better one. 

Regulation, — With the growth of commerce in feedingstuft's va- 
rious forms of fraud and deceit began to be practiced by manufac- 
turers of and dealers in these commodities. These practices were 
responsible for the enactment of laws regulating commerce in feeds. 
The first feed law was enacted by Connecticut in 1895, and shortly 
thereafter other States also enacted statutes on this subject, until 
at the present time practically all States have regulated commerce 
in feedingstuffs. The few States which do not have specific feed 
laws are those in Avhich commerce in feeds is small. The statutes 
of most States are quite uniform in their essential provisions, al- 
though there is such a difference in some requirements, particularly 
registration of brands, as to cause manufacturers considerable diffi- 
culty in meeting the requirements. A few State laws differ markedly 
from the majority in that they require, under certain conditions, the 
statement of the percentage of each ingredient in a feed. In addi- 
tion to the various State regulations the Federal Food and Drugs Act 
of 1906 is applicable to feeds for animals. 



SUMMARY OF REPORT ON COMMERCIAL FEEDS. 15 

The State and Federal authorities in charge of enforcing feed 
laws have formed an association known as the Association of Feed 
Control Officials of the United States, which has served to bring 
about more uniformity in matters pertaining to feed regulations. 
These officials adopted the policy of publicity in respect to fraudulent 
practices. For example, as early as 1898 Massachusetts issued a bul- 
letin regarding the inspection of feedingstuffs in that State. This 
bulletin contained advice to farmers regarding feeding matters, and 
cautioned them against the use of certain feeds. 

The results of feed-law enforcement, as reported by the different 
States, indicate that the great bulk of the feeds which enter into 
commerce have been found to be substantially equivalent to the guar- 
anties under which they have been sold. A comparison made by the 
Commission from published sources of the extent to which the 
straight and ready-mixed feeds varied from their guaranteed chemi- 
cal analyses showed no consistent differences in the average percent- 
a.ge of deficiencies and overages as between the two classes. 

It is undoubtedly a fact that the enactment and enforcement of 
feed laws has resulted in great improvement so far as fraudulent 
practices are concerned. There are being found to-day comparatively 
few cases where feedingstuffs have been adulterated with substances 
considered deleterious or as having practically no nutritive value. 

o 



